Page 53 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes The next most important step is to issue the materials out of latest consignments at first. If the

latest consignments do not carry sufficient volume to issue, the next later receipt should be taken
into consideration in addition to the latest consignments.
Finally, whatever the closing balance available at the end of all transactions is known as the value
of the closing stock of the materials.
Stores Ledger Account Last in First out (LIFO)

Date Particulars Receipts Issues Balance
Qty. Total Unit Qty. Total Unit Qty. Total Unit
cost cost ` cost ` cost ` cost cost `
` `
Jan 1 Opening --------------------- ----------------------- 500 8 4,000
balance
Jan 4 Requisition 200 8 1,600 300 8 2,400
Slip No
Jan 5 Receipt No 200 8.50 1,700 ------------------ 300 8 2,400
200 8.50 1,700
Jan 10 Requisition ------------------ 8.50 1,700 100 8 800
}
Slip No 400 200 8 1,600
200
Jan 12 Receipt No 150 8.20 1,230 ------------------- 100 8 800
150 8.20 1,230
Jan 15 Requisition --------------------- 100 8.20 820 100 8 800
slip No 50 8.20 410
Jan 19 Requisition --------------------- 8.20 410 50 8 400
}
slip No 100 50
50 8 400
Jan 20 Receipt No 300 9 2,700 --------------------- 50 8 400
300 9 2,700
Jan 25 Receipt No 400 8 3,200 ------------------------- 50 8 400
300 9 2,700
400 8 3,200
Jan 26 Requisition -------------------- 200 8 1,600 50 8 400
No 300 9 2,700
200 8 1,600
Jan 30 Requisition -------------------- 8 1,600 Closing stock value
}
No 250 200 9 450 9 2,250
}
50 300 250
50 8 400
TOTAL 2,650

3.3.3 Highest in First out (HIFO)

The major underlying assumption of this method is to value the closing stock as minimum as
possible at the end of concluding the stores register. The high priced materials are issued one after
the another, among the various consignment of the materials available in the stores. This method
may not only assist the firm to devalue the stock, but also to price the issue exorbitantly. It leads

to a charge through cost plus contracts. It may be possible for the firm during the monopoly

situations to increase the price of materials.

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